JAGADEESH GANGADHAR,CHITRADURGA vs. THE INCOME TAX OFFICER WARD - 1, CHITRADURGA, CHITRADURGA

In this appeal, the assessee has raised the following grounds: - 1. The learned Commissioner of Income-tax (Appeals)-NFAC, Delhi has erred in passing the impugned order in the manner passed. The impugned order passed confirming the assessment order is bad in law and such order is liable to be quashed. 2. Without prejudice, the learned CIT(A) has erred in confirming the addition made by the Assessing officer by treating the agricultural income as unexplained money u/s 69A of the Act. On the facts and circumstances of the case and the law applicable, there being no unexplained money, the provisions of section 69A of the Act are not applicable. The addition made to the income of the appellant on an erroneous premise is to be deleted. 3. In any case, the authorities below have erred in not appreciating the fact that the appellant had sufficient agricultural lands and earned agricultural income of Rs. 48,68,369/- and erred in treating the agricultural income as unexplained money to the extent of Rs. 30,18,910/- The appellant having actually earned the Agricultural income to the extent of Rs. 48,68,369/- which are duly supported with documentary evidences are to be accepted as such and the addition as made/confirmed is to be deleted. 4. In any case, the levy of taxes at special rates u/s 115BBE of the Act is bad in law and same is liable to be deleted. 5. The appellant denies liability to pay interest and the interest levied erroneously is to be deleted. 6. In view of the above and on the grounds to be adduced at the time of hearing, it is requested that the impugned orders passed be quashed OR atleast the addition as made be deleted, agricultural income as declared by the appellant be accepted, levy of taxes at special rates be deleted and the interest levied be also deleted. 3. The only issue raised in the present appeal pertains to the addition of Rs. 30,18,910/- treating the agricultural income as unexplained money under section 69A of the Act.

The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and for the year under consideration filed its return of income on 02.01.2021 declaring a total income of Rs. 2,11,650/- and agricultural income of Rs. 48,68,369/-. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. In response, the assessee submitted copies of the sale bills for agricultural produce, etc., and stated that the agricultural income was earned from the sale of Betal Nut, Paddy, Onion, Vegetable, Coconuts and Bananas. Accordingly, the assessee claimed total sales of Rs. 57,86,569/- and, after claiming total agricultural expenses of Rs. 9,18,200/-, claimed net agricultural income of Rs. 48,68,369/- during the year under consideration. During the assessment proceedings, it was observed from the RTC and Mutation register submitted by the assessee that he had produced only Paddy and Areca Nut crops. Further, during the assessment proceedings, the assessee claimed to have performed various agricultural operations for the production of the aforementioned crops. However, the assessee did not furnish any details of the expenditure incurred in respect of water dripping, manual weeding, harvesting, land preparation, purchase of banana plants, etc. The assessee only furnished copies of the purchase of seeds, farm yard manure, fertiliser, and insecticides of Rs. 4,71,500/- only against the claim of total sales of agricultural produce of Rs. 57,86,569/-. Further, it was noticed that in the assessment year 2019-20 the assessee claimed to have earned agricultural income of Rs. 9,18,186/-. However, in the year under consideration, the agricultural sales exponentially increased to Rs. 48,68,369/-. Regarding the increase in agricultural income during the year under consideration, the assessee submitted that the financial year 2018-19 was the first year of farming, and he was not fully occupied in the farming activities. However, in the year under consideration, the assessee claimed that he acquired agricultural land at Dhyamavanahalli, on which an onion crop was grown. During the assessment proceedings, it was noticed that the assessee had claimed to have sold onions of Rs. 30,18,910/- from 01.02.2020 to 17.02.2020 from the land which was acquired by him on 03.10.2019. However, from the details provided in RTC, it was noticed that no crops/onion has been grown on the said land during the year under consideration. Accordingly, the Assessing Officer (“AO”), vide order dated 19.09.2023 passed under section 143(3) r.w.s. 144B of the Act, disagreed with the claim of the assessee that the agricultural income of Rs. 30,18,910/- was from the sale of onions. Further, after taking into consideration the process of onion cultivation, the AO noted that about 10- 12 kg of seeds are required to raise seedlings for 1 hectare of transplanting. It was also noted that the onion production requires a heavy dose of fertilisers for a good yield. Taking into consideration the fact that the land was purchased by the assessee on 03.10.2019, the AO disputed the claim of the assessee of selling the onion from 01.02.2020 to 17.02.2020 as the cultivation of onion takes approximately 250 days. Accordingly, disagreeing with the submissions of the assessee that Rs. 30,18,910/- was received by the assessee as agricultural income from the sale of onions, the AO treated the said income as unexplained money under section 69A of the Act and added the same to the total income of the assessee.

The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and upheld the addition made by the AO on the basis that the assessee had failed to furnish necessary documents in support of his claim. The relevant findings of the learned CIT(A) are reproduced as follows:- “During the course of appellate proceedings also, the appellant has failed to furnish necessary documents in support of his claim. Given the cumulative deficiencies like the unproven jump in income, the inherent doubts regarding the commercial impossibility of the timing and yield, and the failure to furnish cogent documentary evidence of key inputs like seeds, fertilizers, etc. and comprehensive agricultural operations, there are no cogent reasons to disagree with the findings of the AO. The Appellant failed to satisfy the primary burden of proving the nature and source of the credit of Rs. 30,18,910/- as bona fide agricultural income. Consequently, the AO was justified in rejecting the explanation and treating the sum as unexplained money under Section 69A of the Act. In light of the above discussion, the addition of Rs. 30,18,910/- under Section 69A of the Act is sustained. Therefore, these grounds of appeal are dismissed. Being aggrieved, the assessee is in appeal before us.

During the hearing, the learned Authorised Representative (“learned AR”) submitted that during the year under consideration, the assessee acquired 13.25 acres of land at Dhyamavanahalli. The learned AR submitted that, accordingly, the assessee’s agricultural income increased in the year under consideration. It was submitted that on the said land the assessee cultivated 1125.83 quintals of onion, which was sold for Rs. 30,18,910/-. It was further submitted that during the assessment proceedings, the assessee furnished a copy of the purchased bills of onion seeds and bills for the sale of onion, which were not taken into consideration by any of the lower authorities. The learned AR submitted that the expenditure incurred on fertilisers and manures after 03.10.2018 was also ignored while deciding the issue against the assessee. It was submitted that the onion was sold in the APMC, and the sale consideration was received through the banking channel. As regards RTC details, the learned AR submitted that the same is based on the old record and given an opportunity, the assessee can furnish the updated RTC details for the year under consideration.

On the other hand, the learned Departmental Representative vehemently relied upon the order passed by the lower authorities and submitted that the assessee completely failed to justify the earning of income of Rs. 30,18,910/- from the sale of onions during the year under consideration, and therefore, the said income was correctly assessed in his hand under section 69A of the Act.

We have considered the submission of both sides and perused the materials available on record. In the present case, there is no dispute that the assessee is an agriculturist and that, during the year under consideration, the assessee earned agricultural income. As per the assessee, he earned gross agricultural income of Rs. 57,86,569/- from the sale of Betal Nut, Paddy, Onion, Vegetable, Coconuts and Bananas. From the perusal of the assessment order, it is evident that even though the AO raised various queries regarding the genuineness of the claim of earning agricultural income during the year under consideration, viz-a-viz, the agricultural expenses incurred by the assessee. However, made the addition only on account of the agricultural income claimed to have been earned from the sale of onions. As per the assessee on 03.10.2019, he purchased 13.25 acres of agricultural land at Dhyamavanahalli, on which he cultivated onion, and from the sale of the same, he earned agricultural income of Rs. 30,18,910/-. We find that the AO, as well as the learned CIT(A), have recorded a categorical finding that the assessee did not furnish any evidence regarding the expenditure incurred for having a crop of onions. On the other hand, as per the assessee, he not only incurred expenditure on the purchase of onion seeds of Rs. 23,400/- during the year under consideration but also incurred expenditure on fertilisers/insecticides of Rs. 1,50,758/- after 03.10.2019. In this regard, during the hearing, the learned AR specifically referred to a copy of the purchase bill for onion seeds, which forms part of the paper book Volume 1, at Page 19. Further, we find that the lower authorities have taken cognisance of the details in the RTC, which specifically mention a NIL onion crop cultivated by the assessee during the year under consideration. During the hearing, the learned AR submitted that the said RTC details are based on an old record and the same have not been updated. It was further submitted that if given an opportunity, the assessee shall furnish the updated RTC details to support its contention that onions were grown at the land purchased by the assessee during the year under consideration. As regards the sale of onions, the assessee has also placed on record the sale bills, which form part of the paper book Volume 2 from Pages 36 – 41. Thus, as per the assessee, from 01.02.2020 to 17.02.2020, he sold Rs. 1125.83 quintals of onion for a total consideration of Rs. 30,18,910/-. Further, the assessee has also placed on record a copy of its bank statement to justify the receipt of sale consideration through the banking channel.

It is clearly evident from the record that, for lack of complete evidence, the lower authorities disagreed with the submissions of the assessee. Further, the evidence specifically relied upon by the learned AR and claimed to have been furnished before the lower authorities has not been examined. Therefore, we deem it appropriate, in the interest of justice, to grant one more opportunity to the assessee to substantiate its claim of earning agricultural income to the tune of Rs. 30,18,910/- from the sale of onions. Since the issue under consideration requires detailed verification of evidence/documents, we restore the matter to the file of the Jurisdictional AO for de novo adjudication, after taking into consideration the evidence placed on record by the assessee. Further, the assessee is directed to furnish any other details as may be sought by the AO for complete adjudication of the issue. Thus, the assessee is directed to place on record before the AO all the details in support of its claim that the aforesaid income was earned from the sale of onions cultivated in the land of the assessee. Accordingly, with the above directions, the impugned order is set aside, and the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open court on 31st July, 2026.